Daily Commentary

For many months, pundits have warned the triple threat of tariffs, real estate woes and tepid consumption are destined to squash China’s economy. Yet once again, echoing Q1, Chinese Q2 GDP showed resilient growth, alongside a slew of other data released Monday. Pundits met the report with skepticism, noting manufacturing powered it and August 12’s deal deadline with the US looms. While there are factors worth monitoring, chiefly tariffs’ effects, China’s economy has repeatedly demonstrated its resilience and ability to add to world growth. Chinese GDP grew 5.2% y/y in Q2, beating analysts’ expectations for a 5.1% rise, but slowing from Q1’s 5.4%.[i] That lands 2025’s first half growth at 5.3%, on track to hit the Chinese government’s target for “around 5%” growth this year. From a sector standpoint, services led the way in Q2, growing 5.7% y/y and accelerating from Q1’s 5.3%. Agriculture grew 3.8% y/y, up from Q1’s 3.5%, while manufacturing slowed to 4.8% y/y from Q1’s 5.9%. Along with GDP, China’s National Bureau of Statistics (NBS) released June monthly data, which were mixed but mostly positive. Both exports and industrial production (IP) impressed, rising 5.8% y/y and 6.8%, respectively.[ii] Some pundits chalked this up to companies’ front-running the August 12 tariff deadline, which could be true to some extent. But it is worth noting US-bound shipments fell a whopping -24% in Q2 while exports headed elsewhere—particularly to southeast Asia—rose sharply. To us, this looks like corporations rerouting shipments through other countries to mitigate tariffs’ effects, known as transshipping. We saw plenty of this amid President Trump’s China tariffs in 2018 and 2019, so this could be a rerun. Now, the Trump administration is seeking to tamp this down via higher tariffs on transshipped goods, as seen in the Vietnam deal earlier this month. This raises ...

Editors’ note: MarketMinder is nonpartisan, favoring no party nor any politician, and assesses political developments solely for their potential effects on the economy, markets and personal finances. In non-tariff news, some recent political developments in Germany and Spain have grabbed eyeballs. While the bluster has stirred up chatter about what these governments can and can’t accomplish, we think the underlying gridlock is an underappreciated positive for stocks. At first blush, political gridlock may not seem optimal. It hinders legislators from passing laws—ostensibly their job—and tends to involve noisy squabbling. This can frustrate voters, many of whom want their elected representatives to take action to improve general living conditions. But from an investment perspective, gridlock can be bullish because it decreases the likelihood of legislative change. Put on your investor cap. Companies generally prefer a political environment where the rules are stable, enabling them to more easily plan and take risk (i.e., invest). If a government can quickly and easily pass big rule changes, businesses would likely be more cautious in order to determine the costs and potential unintended consequences—which can discourage risk-taking. Even if one new law doesn’t affect them, the higher likelihood future laws could creates risk aversion. Because gridlock decreases the likelihood sweeping changes become reality, it eases this uncertainty. Businesses can map out both costs and better project expected return on investment. Now, this applies mostly to the developed world. Many nations in developing and emerging markets would likely benefit from passing and implementing reforms that boost competitiveness. But most major developed economies, including Germany and Spain, are already globally competitive. For countries with strong property rights and the rule of law, gridlock is a positive. And that positive reigns in Germany and ...

Editors’ Note: MarketMinder prefers no party nor any politician. We assess developments for their economic and market implications only. Is this news or noise? This conundrum confronts investors daily, especially on the political front—no matter who or which party occupies the White House. Often, confusingly, the answer can be “both,” requiring investors to learn to see things differently from the crowd. So it is with Wednesday’s seeming seesaw over whether President Trump will dismiss Fed head Jerome Powell—and the broader issue of Fed independence. Heated headlines topped mastheads Wednesday and into Thursday morning, but markets barely blinked, which we think is right. What gives? Let us dive in. At this point, it is no secret Trump is displeased with Powell, whom he appointed to succeed Janet Yellen in 2017. The administration routinely voices its desire for interest rate cuts, but Powell’s Fed has opted to hold after late 2024’s half-percentage-point cut. Early in his second term, Trump reportedly explored the possibility of firing Powell. That never progressed past whispers and stray comments, but Trump has also indicated Powell won’t get a second term, and his administration is apparently already vetting candidates to take the reins next year. As names surface, headlines parse their views and records to assess the likelihood they will be independent. But now and then, rumors of Powell’s early dismissal return. They did so Wednesday, with reports that Trump asked Congress if he can fire Powell—followed by Trump publicly calling termination “highly unlikely.” Coverage of this alluded to seesawing stock markets, falling and rising as the news evolved. But it all netted out to a slight, 0.3% S&P 500 rise on the day.[i] We aren’t legal experts, but it is pretty clear the president can’t fire the Fed chair without “cause,” which policy disagreements about rate ...

Another day, another flurry of debt concerns—this time centered on Japan, where bond yields spiked as investors grappled with talk of the government potentially getting more stimulus-minded after Sunday’s upcoming upper house election. Sure, Japan’s gross government dept topping both 200% of GDP and one quadrillion yen might not have caused problems before now, but with rates now higher today, many claim the chickens are finally, after many years coming home to roost. But a quick look at public finances shows this is a false fear, and Japan’s debt isn’t a ticking timebomb for stocks or bonds. This is actually Japan’s second bond market freakout this year. The first struck in May, when Prime Minister Shigeru Ishiba—seemingly posturing for the upcoming election—called Japan’s fiscal situation “worse than Greece” and warned higher deficits would cause trouble. At the time, it looked to us like he was trying to combat the opposition Constitutional Democratic Party of Japan’s (CDPJ’s) polling ascent, using debt fears to take the shine off their proposed fiscal stimulus. Yields eventually settled down—alongside global rates—as widely feared bond auctions went off without a hitch. But now polls indicate the CDPJ is in pole position to take a majority in this weekend’s election for the upper chamber of parliament, potentially putting a sales tax cut on the agenda and cranking up the deficit. Now 10-year and 30-year yields are about where they were in May, basically an all-time high for the latter. Look, Japan’s debt is high. And we don’t think it is beneficial for any country to pile on debt endlessly. Doing so can redirect resources from the private sector and interfere with the optimal allocation of capital, which can hamstring growth. We also don’t think Japan benefited tremendously from the repeat fiscal “stimulus” that pushed debt way, way up ...

In the wake of the S&P 500’s rebound to new highs following this spring’s correction, older fears are back: Now murmurs are surfacing arguing US stocks are now too expensive, with pundits suggesting elevated price-to-earnings ratios (P/Es) signal trouble ahead.[i] But hold on. Valuations aren’t a forecasting easy button. A sober review of history proves they tell you very little about where markets are headed. As the abbreviation implies, P/E ratios divide an index’s (or stock’s) price by its components’ (or the company’s) earnings. This technically represents how much investors are willing to pay for each dollar of earnings, so a high ratio is theoretically a hefty price tag. So, with three common P/E variations—trailing, forward and the cyclically adjusted P/E (CAPE)—sitting well above their long-term averages, pundits warn “overvalued” stocks are poised to fall.[ii] But all these various flavors have issues that ding their predictive power. Take the trailing P/E ratio, which divides today’s stock or index price by the company’s or indexes’ aggregate earnings over the past 12 months. Two things here: First, past earnings don’t affect future earnings, and stocks care primarily about how the latter squares with expectations. Second, stocks price in earnings 3 – 30 months ahead, so the past year’s earnings were incorporated into the numerator well before today’s calculation. It is backward looking through and through, sapping its predictive power. Some look instead to forward P/Es, which compare prices to analysts’ consensus earnings estimates for the next 12 months. This approach is a bit more forward-looking conceptually, but it still has backward-looking aspects. Then, too, over the past five years, an average 77% of constituents beat consensus estimates, suggesting P/Es based on them will skew too high (from an excessively low denominator).[iii] ...

So here we are, winding down the week when the 90-day pause on the Trump administration’s reciprocal tariffs was set to end, and a lot has happened. There is a deal and talk of more deals, as well as new tariffs and new deadlines. Overall, tariffs remain higher than they entered the year but also below worst-case expectations (Brazil aside). And, while uncertainty lingers, markets are gradually gaining clarity. And most importantly, markets are increasingly moving on from the day-to-day news flow, doing their day job of pricing in the next 3 – 30 months. The new deal, which follows modest deals with the UK and China, is with Vietnam. It formalizes a 20% tariff on Vietnamese goods—down from the 46% threatened on Liberation Day—while removing Vietnam’s tariffs on all US goods. It also stipulates goods transshipped through Vietnam will face a 40% rate, but it isn’t clear how transshipping is defined in this context or how it would be enforced. Depending on the specifics, this may create a path for other countries with high tariffs to reduce them by routing goods through Vietnam, especially if their tariffs end up exceeding 40% as China’s did earlier this year. But all in, while the new tariffs on Vietnamese goods are higher than they were on April 1, they are lower than what everyone feared on April 2. For markets, which move most on the gap between reality and expectations, that seems to be enough—particularly since simply knowing the tariff rates helps everyone plan and move forward. As for other trading partners, based on the flurry of announcements posted on President Donald Trump’s Truth Social account, higher tariffs are coming if trade deals aren’t reached by August 1—a deadline whose stickiness the administration seems divided over. Exhibit 1 rounds up the lot announced thus far. Exhibit 1: New Reciprocal Tariff Rates   Source: White House and Reuters, as of 7/10/2025. You might notice the ...

Once again, the UK’s nonpartisan fiscal watchdog has weighed in on public finances and the economic outlook, calling rising debt a “daunting” risk to stability that will limit the Treasury’s options to respond to “future shocks.” And once again, headlines are jumping on the bandwagon, warning not only of debt’s alleged economic and market risks, but that the government will be forced to hike taxes in response—with a wealth tax being the center of current conversations. Many noted long-term Gilt yields’ Tuesday rise, arguing it was markets’ confirmation of trouble. (Never mind that yields eased Wednesday.) Yet a quick look at the numbers confirms UK debt is a political problem, not an economic one—and not a probable threat to UK stocks. Here is what we mean by “political problem.” The reason every Office for Budget Responsibility (OBR) report triggers tax hike hysteria is that, in 1997, when then-Chancellor of the Exchequer Gordon Brown took office, he announced he would adopt a “Golden Rule” for fiscal policy to ensure deficits would stay tame. Parliament formalized this in 1998’s Finance Act, and ever since, governments of both parties have been bound by official forecasts. (Not actual results, forecasts.) Chancellors have tweaked the rules here and there, but in general, they must target a balanced budget within five years. The OBR’s forecasts are the arbiter, and if it doesn’t project fiscal policy and economic developments will bring the budget in line within five years, “austerity” becomes the watchword. Again, this cuts across party lines. If long-term economic forecasts were spot-on and if rising debt were an economic problem, then we would be sympathetic to the repeat OBR-induced freakouts. However, in our view, neither point is true. Long-term forecasts, regardless of who makes them, are fraught with peril. Their baseline assumptions for ...

Editors’ note: MarketMinder is nonpartisan, favoring no party nor any politician, and assesses political developments solely for their potential effects on the economy, markets and personal finances. While all eyes were on the Senate’s marathon session to pass the “One Big Beautiful Bill Act” this week, politics haven’t exactly been quiet across the pond. Namely, French Prime Minister François Bayrou narrowly escaped a no confidence vote while UK Prime Minister Keir Starmer nearly suffered the first defeat of his premiership over a benefit cut package. In our view, this all amounts to a mixed bag for investors: While both scenarios increase political fog today, we see opportunities for bullish falling uncertainty in the future—something investors are familiar with in both countries. Allow us to explain. France’s Government Survives Another No Confidence Motion When taking office in January, Bayrou secured the Socialist Party’s support for his minority government by pledging to pursue pension reforms—a long-running sore spot after President Emmanuel Macron’s deeply unpopular 2023 move raising France’s retirement age from 62 to 64. While the Socialists wanted the increase suspended, potential olive branches included carveouts for people nearing retirement now or those in more physically demanding professions. This teed up four months of closed-door negotiations with fellow lawmakers, union leaders and trade representatives aimed at tweaking this rule without sending France’s pension system into the red by the decade’s end. Talks failed last Monday, as lawmakers couldn’t reach a deal tied to issues around compensating physical laborers and how to finance the tweaks.[i] When Bayrou declined Socialist leaders’ demand to propose pension reform changes anyway, they raised the no confidence motion with the argument that ditching reforms contravened his promises during the ...

If you have been trying to follow the twists and turns of US tax legislation over the last week, you may be feeling a bit whiplashed—and not just because of the Senate’s parade of amendments to the “One Big, Beautiful Bill Act” (OBBBA), which squeaked through the Senate Tuesday after Vice President JD Vance broke a 50-50 tie. Last Thursday, Treasury Secretary Scott Bessent asked Congress to remove the OBBBA’s Section 899, saying a new global agreement on corporate taxation negated the need for a potential “revenge tax” on nations singling out US Tech firms for special taxation. But just one day later, President Trump walked away from trade talks with Canada, citing that nation’s digital services tax. That tax then died Sunday. So what is going on, and why was the digital services duty even still on the table after Thursday’s agreement? We have you covered. For background, in 2021 the Organization for Economic Cooperation and Development (OECD) brokered a deal to install a “global” minimum corporate tax rate, with the Biden administration’s support. Many countries wished to crack down on multinational companies seeking tax havens (e.g., Ireland), so G7 nations agreed on a global minimum tax rate of at least 15%—regardless of the multinationals’ headquarters location. This agreement included another levy on the largest multinationals, forcing them to pay taxes to countries based on where the goods or services were sold (regardless of their physical presence in that country). These tax measures affected America most because of its Tech giants, and nearly 140 countries supported the deal. However, new taxes fall under the realm of national legislatures, and America’s Congress never ratified the agreement. Hence, it wasn’t effective globally, but some nations pushed forward with digital services taxes (DSTs), a bespoke solution to get what they viewed as their fair share of ...

You know investor sentiment is in a weird place when global stocks rise 9.5% in the year’s first half, yet most headlines fixate on the dollar marching off to its “worst start on record.”[i] But alas, that is where we are. Q2’s complete trip from Liberation Day panic to new highs seems lost in the shuffle, supplanted by greenback handwringing. Now, we are of the view that dollar swings are generally overegged. Neither a strong nor weak dollar is inherently good or bad for trade, economic growth or stocks. Currency moves can create winners and losers, but companies hedge for them, and they are only one factor. But also, in proper context, the dollar’s move isn’t so significant. You see, currencies trade in pairs, always, which means that in the developed world, they aren’t one-direction. They generally trend up and down over time, waffling like those sine wave charts you might remember from Intro to Trig. All else equal, money flows to the highest-yielding asset, so currencies will generally track interest rate expectations. That is it. They don’t cause or predict economic trends. They just reflect expectations for future payouts. And currency strength and weakness has absolutely zippo to do with the US dollar’s status as world reserve currency, which also happens to be near-meaningless for US economic and stock market prospects. But because currencies ebb and flow, there will be stretches where moves look big. And because people seem to be hardwired to fear currency moves, those moves will cause angst. Here, folks are worried the dollar is too weak. In Europe, central banks are getting so nervous about currency strength that the Swiss National Bank took rates to zero last week. The answer to all of this is to view moves in context. So this is what we do for you in Exhibits 1 – 4. They show, in order, the dollar relative to the pound, yen, euro and a broad trade-weighted currency basket. The euro chart ...

Summer! A time to relax, unwind and spend time with family and friends in the sun. Unfortunately, scammers are also heating up, spinning new ways to steal assets and private information. Here we will round up a couple of the latest financial scams garnering headlines—and how to avoid them, so you can enjoy a stress-free, safe summer. A new twist on the traditional “pump and dump” scheme In a typical pump and dump, the perpetrator buys a stock, usually a penny stock (those trading below $1 per share, though definitions vary). They then mount a huge campaign urging others to buy, often by touting huge potential returns via financial newsletters, radio, phone calls and the like. As greedy investors swarm, massive inflows drive up the stock’s price until the instigator sells their holdings and ends the campaign, tanking the price and leaving victims with a loss. This is classic market manipulation—illegal, of course—and there is a loooooong list of people convicted. It has inspired some popular Hollywood films, too. But there is a new twist today: Scammers, masquerading as “financial advisers,” are recruiting their victims through social media and messaging apps.[i] They often urge people to buy US-listed Chinese companies—typically stocks that tanked after their initial public offering (IPO). Through manipulative trading, scammers can produce hot short-term gains on the stock, using it as a selling point to victims. And, as always, the perpetrators dump their shares when the time is right, reaping big gains and leaving victims in the red. Or maybe they short the stock after the rise and before the “dump,” double dipping on manipulated gains. A few mental exercises can help avoid all of this. One, always consider the why you are considering buying a stock. Chiefly, in our view, it should about finding the companies best fitting your outlook for their sector and industry—you should be able to make a ...

It is official: After Friday’s modest rise, the S&P 500 is up 0.5% in price terms since February 19.[i] Not that the journey was flat. The -18.7% price index decline from the high through April 8 was wretched, especially with over half of it coming in two days, April 3 and 4—the aftermath of Liberation Day.[ii] The 9.5% rally on April 9, after Trump paused reciprocal tariffs for 90 days, was whiplash-inducing in its own way, prompting worries that it was temporary and the other shoe would soon drop.[iii] But stocks clawed their way back in fits and starts and have now erased the decline. We see a few key lessons. First and foremost: There is nothing magical or significant about getting back to breakeven. This is true whether the downturn is a correction like this one (a sharp, sentiment-induced drop of around -10% to -20%) or a bear market (a longer, deeper, decline of -20% or worse with a fundamental cause). Index levels are arbitrary, and past performance isn’t predictive. We have been in this business a long time, and we have seen far too many investors treat the breakeven point as a good exit point, presuming it must be a false dawn because headlines don’t look great and there is no clarity. So they get out, miss a bull market rally, and miss returns they can’t get back without taking undue risk. It can be a severe long-term setback when you consider all the compound growth those missed returns could have generated over your entire investment time horizon. We know headlines still seem iffy. We still don’t have clarity on whether reciprocal tariffs return on July 9, what future trade deals will look like, which tariffs will stick in the long run, whether the deal-to-make-a-deal with China will come to fruition or how long the latest impasse with Canada will last. Fiscal policy is also still in flux. And while the ceasefire in the Middle East appears to be holding for now, geopolitics are unpredictable. But, friends, these ...

The Swiss National Bank (SNB) re-entered familiar territory last Thursday, cutting its benchmark interest rate by 25 basis points (bps) to 0%. The widely expected move spurred chatter about a return to negative interest rates along with the possible implications for financial markets and the economy at large. Last time around, zero and negative rates were terra incognita for Europe, making any chatter largely speculative. But now we have actual history and results to look at. So let us explore what zero (and negative) rates did and didn’t accomplish for the SNB—which can inform investors’ expectations about the potential efficacy of central bankers’ actions today. The last time the SNB adopted an effective zero rate—commonly referred to as Zero Interest Rate Policy, or ZIRP—was in August 2011, when the policy rate dropped to 0.00% - 0.25%. At the time, the eurozone debt crisis was in full swing, causing the Swiss franc to strengthen as European investors sought a local safe haven. The SNB considered its currency “to be massively overvalued … This current strength of the Swiss franc is threatening the development of the economy and increasing the downside risks to price stability in Switzerland.”[i] Many viewed a strong franc as an export headwind (since it theoretically makes goods and services more expensive for foreign buyers), and the Swiss economy depends heavily on trade. Meanwhile, the strong franc also raised the potential to “import deflation,” which some cast as an economic headwind. Rates stayed at zero until late 2014, when falling oil prices and a plunging Russian ruble sparked renewed demand for “safe investments” (e.g., the franc), prompting the SNB to go a step further and adopt negative rates. As the central bank argued, “The introduction of negative interest rates makes it less attractive to hold Swiss franc investments, and thereby supports the minimum exchange ...

With a ceasefire appearing to hold in the Middle East and the S&P 500 back above pre-conflict levels, other news is starting to find its way back to headlines. Wednesday brought an interesting smattering, featuring stock buybacks, long rates’ recent slide and yet more presidential jawboning about Fed appointments. Let us take a look! The Complicated Truth About Stock Buybacks Per The Wall Street Journal, S&P 500 stock buybacks hit a record high in Q1 2025, topping the previous high notched in Q1 2022, with Tech and Financials leading the charge.[i] Tradition holds that stock buybacks are bullish, yet the S&P 500 fell in Q1 as the correction began mid-February. Financials rose, but Tech was the second-worst performing sector in the index that quarter. And Q1 2022? That was the start of that year’s sentiment-induced bear market. In our view, it is all a good reminder that while buybacks are bullish in nature, they are not automatically a catalyst for positive returns. Stock prices, like all prices, derive from supply and demand. Buybacks, all else equal, reduce supply. But they are only one supply driver, and sometimes firms use them to offset secondary share issuance (e.g., shares awarded through employee compensation), so buybacks don’t always mean total supply is falling. And demand matters, too. If investors are less eager to buy, as they were in late winter and early spring, that can swamp a supply decrease. The stock market is a complex beast. But we aren’t here to pooh-pooh buybacks. And it doesn’t shock us that companies might see them as an excellent use of cash during a volatile spell, buying at a discount and boosting earnings per outstanding share (by reducing the denominator). Recent history has overwhelmingly shown that buybacks and capex can coexist, despite politicians’ frequent gripes to the contrary. We just think it is good to bear in mind that buybacks don’t automatically mean rising prices or ...

Over a week into the latest Middle East conflict, a lot is happening. The US became officially involved over the weekend, Iran’s legislature voted to block the Strait of Hormuz on Monday, and both sides (and their allies’ assets throughout the region) continue taking fire. The situation remains tragic, complex and unsettling, and our hearts go out to all affected. Yet markets seemed to take it all in stride.[i] European stocks fell a bit Monday, but the S&P 500 rose 1.0% in price terms and oil actually erased much of its recent rise. While short-term volatility is always a wildcard—unpredictable—so far, it looks like markets are gradually moving on from the initial scare. Stocks’ reaction has been rather muted from the start, with returns basically flattish and daily moves far milder than April’s tariff-induced wildness. Oil appeared to be where investors registered the bulk of their fears, tied to supply concerns. The prospect of Iranian crude leaving the market or a blocked Strait disrupting tanker traffic caused Brent crude, the global benchmark, to leap from $70.84 on Thursday June 12, the day before Israeli forces struck Iranian nuclear targets, to $76.00 the next day.[ii] That closing price was actually down from intraday highs, indicating fear was perhaps giving way to a rational assessment of global supply. Oil mostly bounced sideways over the next week as the fighting continued and rhetoric escalated. But after oil futures jumped Sunday night following the US airstrikes, crude fell sharply Monday. As we write just after stock market close PDT, it trades below $72.00, down significantly from $76.99 at Friday’s close.[iii] Yes, US airstrikes, Iranian counterstrikes on a US base in Qatar and a parliamentary vote to close the Strait all added up to a steep down day for crude. At first blush, that seems like a headscratcher. But markets tend to like falling uncertainty, and we are gradually getting it. US airstrikes ...